The environmental impact of bitcoin mining explained

How does bitcoin mining and cryptomining work?

To understand the environmental impact of cryptocurrency mining, particularly bitcoin mining, requires first understanding what cryptocurrency is and how the mining process works.

A cryptocurrency -- such as bitcoin -- is a type of decentralized digital currency that can support international transactions, micropayments and peer-to-peer transactions. Some businesses and individuals accept cryptocurrency as a form of payment for goods and services, among other benefits and challenges. The underlying technology relies on blockchain, which is a digital record-keeping system simultaneously available in multiple locations, called nodes, within the network.

Cryptocurrencies, like Bitcoin, don't rely on a central authority to oversee or regulate transactions. Instead, they use complex encryption techniques called cryptomining to secure and verify transactions and control the creation of new units. The environmental impact of cryptocurrency mining -- and Bitcoin mining, in particular -- is largely due to the main cryptomining approach in use called proof of work (PoW). The process requires a massive amount of computing power, as miners use complex algorithms and energy-intensive hardware and software to confirm transactions.

To solve bitcoin's PoW system, miners compete to solve an encrypted puzzle within each block. The miners use specialized software to solve for the mathematical puzzle via trial and error, guessing until they get it right. Bitcoin miners are awarded a certain number of bitcoin for solving these puzzles, essentially being paid to do the validation work that enables the whole system.

The PoW structure rewards miners who have the most powerful computers, since they can make more attempts in a shorter amount of time, making them more likely to solve the puzzle and earn bitcoin as a reward.

A less-frequently used cryptomining approach is also in use. Proof of stake (PoS) requires significantly less energy and computing power than the PoW approach, largely in its limitation of participants. PoS means that the miner must provide a minimum deposit, or stake, to confirm the transaction.

How does bitcoin mining and cryptomining affect the environment?

The cryptomining process has drawn criticism from sustainability advocates as well as some government officials and business leaders who fault the technology for its intense energy requirements, greenhouse gas emissions and significant hardware needs. Cryptocurrencies also generate emissions and have other environmental impacts along their production supply chain and during disposal, generating e-waste at their end of life.

"Proof of work is a huge competition across computers, and that race to find a solution takes a lot of power," said Marc Lijour, a member of the IEEE and CEO at Creative Emergy. "It's very inefficient."

The Cambridge Bitcoin Electricity Consumption Index (CBECI) compares bitcoin's energy needs to other activities, showing bitcoin requires nearly as much energy as powering all the lights and TVs in the U.S.

Bitcoin mining has a presence in 58 countries, with most miners operating in the U.S. At 37.84%, the U.S. has the most energy-intensive bitcoin mining activity in the world, according to data from the CBECI.

But the tech's environmental impact goes far beyond U.S. borders.

Bitcoin's global electricity consumption of 173.42 TWh from 2020 to 2021 exceeds that of some countries, according to a study published by the journal Earth's Future. For example, that amount of power exceeds the combined electricity consumption of Argentina and the Philippines.

That intense energy translates to massive levels of greenhouse gases.

Bitcoin mining processes produced 85.89 MTCO2E, or metric tons of carbon dioxide equivalent, from 2020 to 2021, according to the study. This figure is comparable to 9,665 gallons of gasoline consumed by passenger vehicles, or 96,210 pounds of coal burned in one year, according to the U.S. Environmental Protection Agency's Greenhouse Gas Equivalencies Calculator.

The environmental impact of bitcoin mining has environmental activists, governments and business leaders voicing concerns and questioning how to rein in its effects.

Although there are over 10,000 cryptocurrencies in circulation, bitcoin is the most well-known. Ninety-five percent of cryptocurrency owners and people curious about ownership have heard of bitcoin, according to a 2021 report from cryptocurrency exchange company Gemini.

Bitcoin is the worst environmental offender

The White House points to the fact that Bitcoin requires more energy than all other cryptocurrencies combined, according to the September 2022 report, "Climate and Energy Implications of Crypto-Assets in the United States," published by the White House Office of Science and Technology Policy.

Bitcoin accounted for 60% to 77% of total global crypto-asset electricity use as of 2022, according to the report. The second highest user, the Ethereum network, accounted for 20% to 39%.

Bitcoin's energy consumption is reliant on primarily non-renewable sources.

Researchers estimated that 62% of the electricity used for bitcoin mining globally in 2022 came from fossil fuels, with coal-generated power being the largest single source, according to data from the CBECI.

The numbers for renewable energy resources remain low for bitcoin's energy demands.

It's estimated that 26% of the electricity powering bitcoin mining came from renewables, while the remaining 12% came from nuclear energy, according to data from the CBECI.

As a result, bitcoin's electricity requirements produce a significant amount of greenhouse gas emissions.

Bitcoin's estimated greenhouse gas emissions were about 68.02 MTCO2E in 2022, according to data from Climate Watch, a digital platform managed by the World Resources Institute, a nonprofit organization based in Washington, D.C.

In comparison, Singapore's greenhouse gas emissions were estimated to be about 67.3 MTCO2E in 2022, according to Climate Watch. The greenhouse gas emissions of Belarus were estimated at 65.3 MTCO2E in 2022.

Although bitcoin's energy requirements and its corresponding greenhouse gas emission numbers draw the most scrutiny, experts said bitcoin impacts the environment in other ways.

"There are issues of concern beyond energy consumption," said David Boswell, senior director of community architecture at the Linux Foundation, a nonprofit organization headquartered in San Francisco.

To start, bitcoin mining produces significant amounts of heat from the participating nodes. The production and disposal of hardware specifically for bitcoin mining is also a critical issue.

"Bitcoin miners cycle through a growing amount of short-lived hardware that could exacerbate the growth in global electronic waste," said Alex de Vries, founder of Digiconomist, and Christian Stoll, research affiliate at the Center for Energy Markets of the Technical University of Munich, in their September 2021 article "Bitcoin's growing e-waste problem" published by academic journal Resources, Conservation and Recycling. "E-waste represents a growing threat to our environment, from toxic chemicals and heavy metals leaching into soils, to air and water pollutions caused by improper recycling."

Bitcoin's e-waste adds up to 30.7 metric kilotons annually, which is comparable to the amount of IT and telecommunication equipment waste produced by the Netherlands, according to de Vries and Stoll.

The amount of e-waste generated by bitcoin mining alone could surpass current global estimates.

Bitcoin's annual amount of e-waste "may grow beyond 64.4 metric kilotons" while global e-waste is expected to grow by 70% from 2016 to 2050, according to de Vries and Stoll.

Is sustainable cryptomining realistic?

Some researchers have put the environmental impact of bitcoin mining on par with two other major industries with outsized negative climate impacts -- beef and crude oil. That's according to the September 2022 report, "Economic estimation of Bitcoin mining's climate damages demonstrates closer resemblance to digital crude than digital gold," published by Scientific Reports. The report calculated that for each dollar in bitcoin value produced, the process resulted in 35 cents in global climate damages.

Industry watchers are taking notice.

Pressure is building to address the environmental concerns raised around bitcoin, blockchain and other Web3 technologies, said Joe Davey, partner at West Monroe, a digital services firm headquartered in Chicago. The concern is not coming only from environmentalists but from businesses, too, as many have set sustainability targets and net-zero goals and are questioning whether bitcoin's environmental track record can fit with their corporate objectives.

"The energy consumption issue comes up as a question," Davey said.

Such concerns are prompting some changes in the Web3 space.

According to some experts, the most notable change comes from the Ethereum blockchain network, which shifted from a PoW system to the more energy efficient PoS mechanism in September 2022. The shift -- known as the Merge -- cut energy requirements by more than 99%.

Experts continue to debate whether bitcoin could transition toward more energy-efficient methods.

"For bitcoin to change, you'd need a consensus among a large group," Davey said. "And you'd have forks in bitcoin and that's probably what it's going to take -- a fork [of miners] moving to proof of stake."

For bitcoin users, such a move would present several challenges.

"There's so much sunk costs, with the equipment around the mining rigs, just because bitcoin is the oldest network out there," Boswell said.

Still, experts said some efforts to make bitcoin more sustainable could happen, such as getting a higher percentage of its electricity from renewable sources and recycling its heat -- both of which are happening in some places.

Cryptocurrency growth not halted

Overall government response to bitcoin mining in the U.S. is mixed.

Some states are supporting and encouraging bitcoin mining through policy.

For example, North Dakota and Wyoming passed laws giving tax breaks to petrol producers to fuel bitcoin mining and data centers instead of flaring gas, benefiting blockchain entrepreneurs willing to work with big oil companies, according to the February 2023 report "Web3 and Sustainability: How We Can Reduce the Climate Impact of Blockchains, How Blockchains Can Help Reduce Our Own" published by the Linux Foundation.

Meanwhile, a group of Democratic senators and representatives called for the U.S. Environmental Protection Agency and U.S. Department of Energy to require cryptomining companies to disclose energy use and greenhouse gas emissions.

Cryptominers pushed back on requiring such disclosures in a collection of letters.

"Proof-of-work mining, like all industrial activity, uses energy," said Fred Thiel, chairman and CEO of Marathon Digital Holdings, a digital asset technology company, headquartered in Las Vegas. "However, our energy consumption is minimal relative to comparable industries, and we are increasingly becoming more efficient and more sustainable."

But some states have completely blocked bitcoin mining operations.

New York's Department of Environmental Conservation denied an air permit request to a bitcoin mining operation in 2022, citing that the Greenidge Generation facility "would be inconsistent with or would interfere with the attainment of statewide greenhouse gas emissions limits."

Some global officials have gone further, with a Swedish financial regulator in 2022 calling for a ban on mining.

At the national level, cryptocurrency's negative environmental impact has not gone unnoticed, either.

President Biden issued Executive Order 14067: Ensuring Responsible Development of Digital Assets in March 2022. The order outlines five goals to ensure that the U.S. promotes the responsible development of digital assets, including cryptocurrency development. These goals include consumer and investor protection, monetary stability, decreasing risks, supporting economic competitiveness and responsible innovation.

Mary K. Pratt is an award-winning freelance journalist with a focus on covering enterprise IT, cybersecurity management and strategy.